A recent survey of over 300 employers with over 3 million savers has highlighted some startling information of where employers and employees could be losing out.
As the statistics gathered were primarily large employers, it is likely that for small to medium sized businesses, the numbers could be an even bigger concern.
The report highlighted a number of issues, including the following:
- 1 in 5 employers are not using salary exchange (sacrifice)
- 60% of employers are not monitoring the performance of their default fund
- 87% of employers are not completely confident they would pass the Pensions Regulator’s auto enrolment spot check
- Over 50% of employers have not reviewed scheme charges in the last 2 years
1) Employers not using Salary Exchange (Sacrifice)
The survey found that around 1 in 5 employers are not using salary exchange and are missing out on substantial tax savings. It also suggested that of the ones who are using it, many of them are not using it effectively. Salary Exchange can help increase an average UK employee’s take home pay by £15 per month, whilst saving the employer more than this for each employee.
2) Employers not monitoring the workplace pension default fund
Nearly 60% of employers stated that they hadn’t reviewed their default fund in the last 12 months and 25% said that have not done so in the last 3 years. Many business owners are not aware that new employees joining the company may be going into a different default fund compared to that of their longer serving colleagues and the fund make up and performances can be completely different.
3) The Pensions Regulator Auto Enrolment Spot Check
From January 2022 to June 2022 the Pensions Regulator issued approximately:
- 20,000 Compliance Notices
- 15,000 Fixed Penalty Notices
- 6,000 Escalating Penalty Notices
The Pensions Regulator stated that its aim was ‘not to catch employers out’, but to ‘make sure employers become compliant’. Clearly it is good practice for employers to be aware of their auto enrolment compliance duties, rather than wait until they are caught out by the Pensions Regulator.
4) Pension Scheme Charges
Over half of the employers surveyed said that they had not reviewed the charges paid by the company, or their employees, in the last 2 years. With the changes in the pension arena over that last couple of years, many employers could find that they are able to secure lower charges for their pension scheme (meaning less money coming out of their employees retirement savings pots).
Next Step If you feel that you haven’t had the time to review your workplace pension scheme for a number of years, or that you would like to benchmark your current processes, then please get in touch with us.